[House Report 106-880]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-880
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EXPORT WORKING CAPITAL LOAN IMPROVEMENT ACT OF 2000
_______
September 21, 2000.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Talent, from the Committee on Small Business, submitted the
following
R E P O R T
[To accompany H.R. 4944]
[Including cost estimate of the Congressional Budget Office]
The Committee on Small Business, to whom was referred the
bill (H.R. 4944) to amend the Small Business Act to permit the
sale of guaranteed loans made for export purposes before the
loans have been fully disbursed to borrowers, having considered
the same, report favorably thereon without amendment and
recommend that the bill do pass.
Background and Need for Legislation
According to the Department of Commerce, between 1987 and
1997, the number of small business exporters tripled, going
from 66,000 to 202,000. Small businesses now account for 31
percent of total merchandise export sales spread throughout
every industrial classification. The fastest growth among small
business exporters has been with companies employing fewer than
20 employees. These very small businesses represented 65
percent of all exporting companies in 1997.
Even though the number of small business exporters tripled,
they form less than one percent of all small businesses in the
United States. Among these firms, nearly two-thirds of small
business exporters sold to just one foreign market in 1997. In
fact, 76 percent of small business exporters sold less than
$250,000 worth of goods abroad. In other words, these are
``casual'' exporters. The key is to encourage more small
businesses to enter the trade arena and to encourage ``casual''
small business exporters into becoming more active. Improving
and increasing the availability of financing for export
transactions is one way to help ease the anxiety expressed by
many small businesses fearful of selling abroad.
In response to this data, complaints from small business
exporters about the lack of trade financing, and several
hearings on the problems faced by small business exporters and
improvements to the various small business export promotion
programs of the federal government, Representative Donald
Manzullo, Chairman of the Subcommittee on Tax, Finance and
Exports of the Small Business Committee, introduced H.R. 4944,
the Export Working Capital Loan Improvement Act of 2000.
Purpose
The Export Working Capital Loan Improvement Act of 2000
makes a technical correction to the Small Business Act that
will enable the Small Business Administration (SBA) to sell
Export Working Capital loans on the secondary market. The
Export Working Capital Guarantee Program (EWCP) provides
transaction-specific financing for loans of $833,333 or less
(the Export-Import Bank of the United States (Ex-Im) provides
small businessfinancing for loans over $833,333). Small
business exporters may use this program for pre-export financing of
labor and materials, financing receivables generated from these sales;
and/or standby letters of credit used as performance bonds or payment
guarantees to foreign buyers. The EWCP provides a repayment guarantee
rate of 90 percent to commercial lenders and offers exporters
preliminary commitments (PCs) that encourage lenders to provide credit.
To be eligible, the small business must have been in operation, though
not necessarily exporting, for at least 12 months. Interest rates and
fees are negotiable between the lender and the small business exporter.
Unfortunately, EWCP is a very underutilized program. In
total, the SBA provided only 429 international trade loans in
FY 1999.
Enabling the sale of these loans on the secondary market,
will increase the attractiveness of EWCP loans to lenders by
relieving them of the costs of servicing and paperwork on
small, short term loans. While the authority exists to sell
EWCP loans secondary market sales of SBA guaranteed loans are
conducted infrequently which creates a technical problem
affecting these short term loans.
Due to their size in comparison to most transactions in the
national financial markets SBA loans are combined into large
pools that are sold to secondary market investor approximately
every six months. Current law requires that all 7(a) loans,
including EWCP loans, must be fully disbursed to the borrower
prior to being included in any secondary market sale, hence the
problem. EWCP loans are often approved, disbursed, and repaid
so quickly that they miss the window of opportunity for
inclusion in a biennial secondary market sale. The Export
Working Capital Loan Improvement Act of 2000 will exempt EWCP
loans from the disbursement requirement under the SBA's 7(a)
loan program allowing EWCP loans to be sold as part of a
secondary market pool prior to their full disbursement.
Passage of this technical change will free up more trade
financing for small business exporters. Increasing the
availability of export finance and encouraging more small
businesses to enter into the trade arena.
Consideration of H.R. 4944
At 10 a.m. on July 27, 2000, the Committee on Small
Business met to consider H.R. 4944, and several other pieces of
legislation. Following a review of the provisions of the bill,
the Chairman declared the bill open for amendment. No
amendments were offered. Chairman Talent then moved the bill be
reported, and by unanimous voice vote, a quorum being present,
the Committee passed H.R. 4944 and ordered it reported at 11:00
a.m.
Section-by-Section Analysis
Section 1. Short title
Designates the bill as the ``Export Working Capital
Improvement Act of 2000.''
Section 2. Sale of guaranteed loans made for export purposes
This section amends Section 5(f)(1)(C) of the Small
Business Act by exempting loans made under section 7(a)(14) of
the aforementioned Act from the disbursement requirement.
Section 7(a)(14) of the Small Business Act is the provision in
law that governs the EWCP loan program. This change will allow
EWCP loans to be sold on the secondary market prior to full
disbursement.
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 18, 2000.
Hon. James M. Talent,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4944, the Export
Working Capital Loan Improvement Act of 2000.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark Hadley.
Sincerely,
Arlene Holen
(For Dan L. Crippen, Director).
Enclosure.
congressional budget office cost estimate
H.R. 4944--Export Working Capital Loan Improvement Act of 2000
CBO estimates that implementing H.R. 4944 would have no
significant impact on the federal budget. This legislation
could affect direct spending by lowering the subsidy cost of
certain existing loan guarantees, but we estimate that any such
effects would be negligible. Because the bill could affect
direct spending, pay-as-you-go procedures would apply. H.R.
4944 contains no intergovernmental or private-sector mandates
as defined in the Unfunded Mandates Reform Act and would impose
no costs on state, local, or tribal governments.
Under current law, the Small Business Administration (SBA)
may guarantee loans to small businesses to develop foreign
markets. Lenders may sell the guaranteed portion of such loans
after the loans are fully disbursed to the borrowers. SBA is
authorized to charge a fee on loans sold on the secondary
market if the sale price exceeds 110 percent of the value of
the guarantee. Amounts collected from such fees reduce the
subsidy cost of those loan guarantees.
H.R. 4944 would authorize banks to sell the guaranteed
portion of loans for export working capital before the loans
are fully disbursed to the borrowers. CBO expects that
implementing this provision would increase the volume of loans
sold. We expect, however, that very few of these export-related
guarantees would sell for more than 110 percent of the value of
the guarantee, based on trends in the secondary market for
loans and information from SBA. As a result, we estimate that
the legislation would have no significant effect on the subsidy
cost of existing or future guarantees of such loans.
The CBO staff contact is Mark Hadley. This estimate was
approved by Peter H. Fontaine, Deputy Assistant Director for
Budget Analysis.
Committee Estimate of Costs
Pursuant to the Congressional Budget Act of 1974, the
Committee estimates that the amendments to the Small Business
Investment Act contained in H.R. 4944 will not increase
discretionary spending over the next five fiscal years. The
Committee also estimates that H.R. 4944 will not affect direct
spending. This estimate concurs with Congressional Budget
Office (CBO) estimates.
Furthermore, pursuant to clause 3(d)(2)(A) of rule XIII of
the Rules of the House of Representatives, the Committee
estimates that implementation of H.R. 4944 will not
significantly increase other administrative costs.
Oversight Findings
In accordance with clause 4(c)(2) of rule X of the Rules of
the House of Representatives, the Committee states that no
oversight findings or recommendations have been made by the
Committee on Government Reform with respect to the subject
matter contained in H.R. 4944.
In accordance with Clause (2)(b)(1) of rule X of the Rules
of the House of Representatives, the oversight findings and
recommendations of the Committee on Small Business with respect
to the subject matter contained in H.R. 4944 are incorporated
into the descriptive portions of this report.
Statement of Constitutional Authority
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in Article I, Section 8, clause 18, of the
Constitution of the United States.
Compliance With Public Law 104-4
H.R. 4944 contains no unfunded mandates.
Congressional Accountability Act
H.R. 4944 does not relate to the terms and conditions of
employment or access to public services or accommodations
within the meaning of section 102(b)(3) of Public Law 104-1.
Federal Advisory Committee Statement
This legislation does not establish or authorize the
establishment of any new advisory committees.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SECTION 5 OF THE SMALL BUSINESS ACT
Sec. 5. (a) * * *
* * * * * * *
(f)(1) The guaranteed portion of any loan made pursuant to
this Act may be sold by the lender, and by any subsequent
holder, consistent with regulations on such sales as the
Administration shall establish, subject to the following
limitations:
(A) * * *
* * * * * * *
[(C) each loan shall have been fully disbursed to the
borrower prior to any sale.]
(C) each loan, except each loan made under section
7(a)(14), shall have been disbursed to the borrower
prior to any sale.